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Note 15: Property, plant and equipment

a  Group

£ million Fleet Property Equipment Group total
Cost        
Balance at April 1, 2007 11,223 1,398 753 13,374
Additions (note 15d) 428 122 87 637
Disposals (262) (12) (36) (310)
Balance at March 31, 2008 11,389 1,508 804 13,701
Additions (note 15d) 584 54 13 651
Disposals (118) (45) (30) (193)
Reclassifications (19) 1 (1) (19)
Exchange movements   (2) (3) (5)
At March 31, 2009 11,836 1,516 783 14,135
Depreciation and impairment        
Balance at April 1, 2007 5,070 466 481 6,017
Charge for the year 542 72 47 661
Disposals (199) (7) (34) (240)
Balance at March 31, 2008 5,413 531 494 6,438
Charge for the year 561 59 52 672
Disposals (116) (45) (29) (190)
Reclassifications (18)     (18)
At March 31, 2009 5,840 545 517 6,902
Net book amounts        
March 31, 2009 5,996 971 266 7,233
March 31, 2008 5,976 977 310 7,263
Analysis at March 31, 2009        
Owned 2,535 950 260 3,745
Finance leased 2,004     2,004
Hire purchase arrangements 1,342     1,342
Progress payments 85 21 6 112
Assets not in current use* 30     30
  5,996 971 266 7,233
Analysis at March 31, 2008        
Owned 2,572 952 300 3,824
Finance leased 1,728     1,728
Hire purchase arrangements 1,549     1,549
Progress payments 127 25 10 162
  5,976 977 310 7,263
  Group
£ million 2009 2008
The net book amount of property comprises:    
Freehold 267 274
Long leasehold improvements 260 256
Short leasehold improvements** 444 447
At March 31 971 977

* During the year, two Boeing 747-400 aircraft were temporarily stood down. The net book value of the two aircraft as at March 31, 2009, amounts to £30 million. These aircraft are expected to return to the operating fleet and, as such, the Group continues to depreciate the aircraft.

** Short leasehold improvements relate to leasehold interests with a duration of less than 50 years.

As at March 31, 2009, bank and other loans of the Group are secured on fleet assets with a cost of £624 million (2008: £477 million) and letters of credit of £330 million in favour of the British Airways Pension Trustees are secured on certain aircraft (2008: £330 million).

Included in the cost of tangible assets for the Group is £349 million (2008: £345 million) of capitalised interest.

Property, plant and equipment with a net book value of £3 million was disposed of by the Group during the year ended March 31, 2009 (2008: £70 million) resulting in a net gain on disposal of £2 million (2008: £15 million).

b  Company

£ million Fleet Property Equipment Company total
Cost        
Balance at April 1, 2007 10,875 1,310 688 12,873
Additions 427 121 81 629
Disposals (260) (10) (33) (303)
Balance at March 31, 2008 11,042 1,421 736 13,199
Additions 559 54 8 621
Disposals (118) (45) (30) (193)
Reclassifications (19)     (19)
At March 31, 2009 11,464 1,430 714 13,608
Depreciation and impairment        
Balance at April 1, 2007 4,918 434 422 5,774
Charge for the year 527 70 45 642
Disposals (197) (7) (32) (236)
Balance at March 31, 2008 5,248 497 435 6,180
Charge for the year 545 58 50 653
Disposals (116) (45) (29) (190)
Reclassifications (18)     (18)
At March 31, 2009 5,659 510 456 6,625
Net book amounts        
March 31, 2009 5,805 920 258 6,983
March 31, 2008 5,794 924 301 7,019
Analysis at March 31, 2009        
Owned 2,356 899 252 3,507
Finance leased 2,004     2,004
Hire purchase arrangements 1,342     1,342
Progress payments 73 21 6 100
Assets not in current use* 30     30
  5,805 920 258 6,983
Analysis at March 31, 2008        
Owned 2,394 899 292 3,585
Finance leased 1,728     1,728
Hire purchase arrangements 1,549     1,549
Progress payments 123 25 9 157
  5,794 924 301 7,019
  Company total
£ million 2009 2008
The net book amount of property comprises:    
Freehold 220 226
Long leasehold improvements 256 256
Short leasehold improvements** 444 442
At March 31 920 924

* During the year, two Boeing 747-400 aircraft were temporarily stood down. The net book value of the two aircraft as at March 31, 2009, amounts to £30 million. These aircraft are expected to return to the operating fleet and, as such, the Company continues to depreciate the aircraft.

** Short leasehold improvements relate to leasehold interests with a duration of less than 50 years.

As at March 31, 2009, bank and other loans of the Company are secured on fleet assets with a cost of £551 million (2008: £404 million).

Included in the cost of tangible assets for the Company is £347 million (2008: £343 million) of capitalised interest.

Property, plant and equipment with a net book value of £3 million was disposed of by the Company during the year ended March 31, 2009 (2008: £67 million) resulting in a net gain on disposal of £2 million (2008: £15 million).

c  Depreciation

Fleet is generally depreciated over periods ranging from 18 to 25 years after making allowance for estimated residual values. Effective annual depreciation rates resulting from those methods are shown in the following table:

  Group
Per cent 2009 2008
Boeing 747-400 and 777-200 3.7 3.7
Boeing 767-300 4.8 4.8
Boeing 757-200 4.4 4.4
Boeing 737-400 4.8 4.9
Airbus A319, A320, A321 4.9 4.9

For engines maintained under ‘pay-as-you-go’ contracts, the depreciation lives and residual values are the same as the aircraft to which the engines relate. For all other engines, the engine core is depreciated to residual value over the average remaining life of the related fleet.

Major overhaul expenditure is depreciated over periods ranging from 54 to 78 months, according to engine type. During the prior year, the Group changed the depreciation period for the RB211 engine, used on Boeing 747 and 767 fleets, from 54 months to 78 months. The change resulted in a £33 million decrease in the annual depreciation charge for this engine type.

The economic lives of the Boeing 737-400 aircraft were reviewed and extended during the year in accordance with the planned usage of the aircraft. The net impact to the income statement is a £1 million decrease to the depreciation charge for the year ended March 31, 2009.

Property, with the exception of freehold land, is depreciated over its expected useful life subject to a maximum of 50 years. Equipment is depreciated over periods ranging from four to 20 years, according to the type of equipment.

d  Analysis of Group property, plant and equipment additions

        Group total
£ million Fleet Property Equipment 2009 2008
Cash paid 438 66 43 547 596
Capitalised interest 4     4 15
Acquired through business combinations 6     6  
Reclassification of operating leases to finance leases 122     122  
Accrual movements 14 (12) (30) (28) 26
At March 31 584 54 13 651 637

During the year ended March 31, 2009, the Group acquired property, plant and equipment with a cost of £651 million (2008: £637 million), including £6 million of additions arising from the acquisition of L’Avion (note 6). Included in the acquisition of these assets is £122 million relating to the reclassification of 10 Airbus A319 aircraft from operating leases to finance leases, where the Group waived the right to return the aircraft to the lessor.

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